The Competition and Markets Authority (CMA) has raised concerns that the planned merger of Vodafone Three could leave customers and businesses worse off.

In its Phase 1 investigation launched in January this year, the watchdog found that the deal could lead to higher prices and impact investment in UK mobile networks.

The CMA said the deal, which seeks to combine two of the four UK mobile network operators, could make it difficult for smaller mobile ‘virtual’ network operators such as Lyca Mobile and Sky Mobile to negotiate deals for their own customers by reducing the number of operators capable of hosting them.

When announcing their deal last year, Vodafone and Three UK claimed that combining both businesses would result in significant benefits to customers as well as speed up the deployment of new technologies.

However, the regulator said that these claims depend on a number of assumptions about how the firms will combine, expressing concerns that the merger would reduce the incentive to invest in their networks.

Vodafone and Three have five working days to respond with meaningful solutions to the CMA, otherwise the deal will be referred to a more in-depth Phase 2 investigation.

Julie Bon, Phase 1 decisionmaker for the case at the CMA, said that millions of people in the UK depend on effective competition in the mobile market in order to access the best deals.

“Whilst Vodafone and Three have made a number of claims about how their deal is good for competition and investment, the CMA has not seen sufficient evidence to date to back these claims,” Bon added. “Our initial assessment of this deal has identified concerns which could lead to higher prices for customers and lower investment in UK mobile networks which warrant an in-depth investigation unless Vodafone and Three can come forward with solutions.”

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